Bank ownership and governance quality in India: Evolution and detection of convergence clubs

Rachita Gulati

The North American Journal of Economics and Finance, 2022, vol. 62, issue C

Abstract: Utilizing a novel panel dataset for the period from 2009 to 2018, this paper investigates how the corporate governance of Indian banks has evolved since the post-global crisis and identifies convergence clubs among banks in distinct ownership groups. It also presents optimal policy priorities for specific aspects of corporate governance. To assess the quality of bank corporate governance, we used a non-parametric “Benefit-of-the-Doubt” (BoD) approach to create a bank-wise composite index of corporate governance based on 48 governance norms. Empirical results have shown that while Indian banks have made remarkable progress in adhering to the mostly mandatory corporate governance norms in the past few years, but their current level of governance isn’t adequate to characterize it as a “socially-efficient” structure. A typical public bank generally prioritized maintaining adequate disclosure and transparency, by and large, while a private bank focuses more spotlight on audit function, followed by risk management and board quality. The results based on Phillips and Sul’s (2007, 2009) clustering and merging algorithms reveal two convergent clubs in the private banking segment and a sole club in the public sector banking segment.

Keywords: Corporate governance; Data envelopment analysis; Benefit-of-the-doubt; Club convergence; Indian banks (search for similar items in EconPapers)
JEL-codes: G20 G21 G30 G34 G38 (search for similar items in EconPapers)
Date: 2022
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (1)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:ecofin:v:62:y:2022:i:c:s1062940822000808

DOI: 10.1016/j.najef.2022.101730

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